Law’s broken billing model

There’s an absurdity at the heart of legal billing: the more efficient you are at your job, the less you earn. In other words, the faster you solve a problem, the less you can bill for it.

From a lawyer’s perspective, the billable hour doesn't reward expertise; it rewards time. A job that gets done by a junior in 20 hours can often be done by a more senior lawyer in two or three. At the end of those 20 hours, the junior may still be missing material issues.

From a client’s perspective, they want certainty. Conversely, lawyers are understandably apprehensive about fixed fees when the scope of a matter can shift dramatically based on one fact. So, clients can’t budget, and when the bill arrives, the number rarely matches their expectations, regardless of how much actual value is delivered.

The problem isn’t the work. It’s that clients are paying for hours when what they actually want is an outcome.

Other industries have wrestled with this, too. Accountants face many of the same tensions we do. Doctors receive fixed fees per service, which at least incentivizes efficiency; the faster they work, the more effectively their time is used. Engineers scope and price projects upfront, which is closer to what clients want, but law's unpredictability makes that hard to replicate cleanly.

A licensing model sounds appealing in theory. In practice, it hasn't worked. So, what is the solution? I’ve tried a number of models, and so far, none has worked better than a straight hourly billing model. I’ve tried fixed-fee for service. I’ve tried flat monthly rates. I’ve tried to clearly scope projects. I’ve seriously considered a credit-based model.

Each of these models fails for different reasons, the most common being that the lawyer's hourly recovery rate declines under each model. I’ll talk more about my learnings another time.

While I don’t have a solution that fixes all the issues, my current thinking is that the real problem isn't just price; it's the surprise. Clients don't object to paying for value. They object to not seeing it coming.

So, I'm experimenting with a transparency-first model: every matter gets split into in-scope and out-of-scope work, with an automated alert each time out-of-scope time is recorded. No more bill shock at the end. The client sees the meter moving in real time. This helps reframe the relationship, from a black box to real-time visibility.

While not a total solution, it feels like a step in the right direction.

Lawyers out there… have you found something that works?